DSGE Model-Based Forecasting of Non-modelled Variables / Frank Schorfheide, Keith Sill, Maxym Kryshko.

Format:

Book

Author/Creator:

Schorfheide, Frank.

Contributor:

National Bureau of Economic Research.

Sill, Keith.

Kryshko, Maxym.

Series:

Working Paper Series (National Bureau of Economic Research) no. w14872.

NBER working paper series no. w14872

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2009.

Summary:

This paper develops and illustrates a simple method to generate a DSGE model-based forecast for variables that do not explicitly appear in the model (non-core variables). We use auxiliary regressions that resemble measurement equations in a dynamic factor model to link the non-core variables to the state variables of the DSGE model. Predictions for the non-core variables are obtained by applying their measurement equations to DSGE model-generated forecasts of the state variables. Using a medium-scale New Keynesian DSGE model, we apply our approach to generate and evaluate recursive forecasts for PCE inflation, core PCE inflation, the unemployment rate, and housing starts along with predictions for the seven variables that have been used to estimate the DSGE model.

Notes:

Print version record

April 2009.